Subsidy helps tractor firms gain volume
States are adding speed to tractor sales this year. Various state governments have lined up subsidy worth well over ~10 billion to incentivise sale of tractors to farmers. It is estimated that states are offering subsidy on as many as 100,000 tractors in this financial year, the highestever for a single year. This forms almost 12 per cent of the industry’s annual domestic sales.
In 2017-18, the subsidy was offered by state governments on approximately 68,000 tractors. This year’s number is a sharp increase of 47 per cent over the previous year. “The number of tractors on which subsidy is planned for this year is so far the highest. States that are supporting this subsidy include Gujarat, Maharashtra, Andhra Pradesh, Telangana, and Madhya Pradesh. The sentiment among farmers is positive this year,” said Raman Mittal, executive director at tractor maker Sonalika.
The subsidy offered varies from state to state, but it is significant in most cases. “The Centre has recently issued fresh guidelines to all states to enhance tractor subsidy amount from ~125,000 to ~250,000 for the rest of the year,” said Bharat Madan, chief financial officer at Escorts, a leading tractor maker. The industry had sold a record 731,637 units of tractors in the domestic market last year and volumes in the current year are expected to cross 800,000 units. The industry also exported 87,000 tractors last year and the number is expected to expand further this year. Madan said the subsidy is high in Assam where 70 per cent of the tractor value is being offered as subsidy (with a cap of ~550,000). “Other states give 40-50 per cent of value in subsidy with certain conditions such as the size of land holding, the application or crop for which the equipment is to be used and so on. The overall intensity this year is higher than a normal year,” he added. Andhra Pradesh is said to be offering a subsidy of ~150,000 to ~200,000 per tractor on over 12,000 tractors. Telangana is offering a subsidy of up to ~300,000 per tractor on more than 12,000 tractors. Maharashtra is giving a subsidy ranging between ~100,000 and ~125,000 on about 17,000 tractors. The largest number of tractors on subsidy is in Gujarat. It is giving subsidy on 32,000 tractors, even though the amount is small, between ~45,000 and ~60,000. Some form of small subsidy provision is available in other states. In most cases, the number of tractors on subsidy has gone up. Industry officials said the provision of subsidy is contributing to the growing tractor volumes. However, the pace of release of this subsidy to tractor dealers after he makes a sale to the farmer is slow and at times affects their working capital.